Lew Presses Congress as U.S. Faces Oct. 17 Deadline

Jacob "Jack" Lew, U.S. treasury secretary, and President Barack Obama have said they won’t negotiate on the limit, which is tied to obligations the U.S. has already incurred. Photographer: Andrew Harrer/Bloomberg

Oct. 2 (Bloomberg) -- The U.S. has started using final
extraordinary measures to avoid a breach of the nation’s debt
limit, Treasury Secretary Jacob J. Lew said as he pressed
Congress to increase borrowing authority “immediately.”

Lew, in a letter addressed to House Speaker John Boehner
dated yesterday, repeated that the measures will be exhausted no
later than Oct. 17.

When that happens, “we will be left to meet our country’s
commitments at that time with only approximately $30 billion,”
he said, “far short of net expenditures on certain days, which
can be as high as $60 billion.”

Lew and President Barack Obama have said they won’t
negotiate on the limit, which is tied to obligations the U.S.
has already incurred. Boehner, an Ohio Republican, has issued a
list of demands before he’ll support raising the ceiling. His
conditions include approval of TransCanada Corp.’s Keystone XL
pipeline, major revisions to the tax code and a one-year delay
of the insurance mandate in the Obama health-care law.

Pacific Investment Management Co.’s Bill Gross said the
U.S. will avoid a “catastrophic” default on Treasury
securities.

‘Global Complex’

“The U.S. Treasury is the center of the global financial
complex,” Gross, manager of the world’s biggest bond fund, said
during a Bloomberg Television interview with Trish Regan and
Adam Johnson. A default would be “unimaginable,” as it would
have “catastrophic” consequences on U.S. borrowing costs, and
would trigger a “complex series of events worldwide” that
would ripple through global financial markets, he said.

Benchmark 10-year yields fell two basis points, or 0.02
percentage point, to 2.63 percent at 9:16 a.m. London time,
according to Bloomberg Bond Trader prices. The 2.5 percent note
due in August 2023 rose 7/32, or $2.19 per $1,000 face amount,
to 98 29/32. The yield dropped to 2.59 percent on Sept. 30, the
lowest level since Aug. 12.

The U.S. budget deficit in June was 4.3 percent of gross
domestic product, down from 10.1 percent in February 2010 and
the narrowest since November 2008, when Barack Obama was elected
to his first term, according to data compiled by Bloomberg from
the Treasury Department and the Bureau of Economic Analysis.

For the first 11 months of the fiscal year 2013, which
ended Sept. 30, the deficit was $755.3 billion, the narrowest
for that period in five years, the Treasury said on Sept. 12.

Partial Shutdown

The U.S. government is already limited in action after
Republicans and Democrats in Congress failed to agree on funding
for the new fiscal year that began yesterday. That led to a
partial shutdown of the government at midnight, forcing about
800,000 federal workers off the job. The shutdown could cost the
economy as much as $10 billion a week, the White House said on
its website.

The Standard & Poor’s 500 Index rose 0.8 percent to
1,695.00 in New York yesterday as investors speculated that the
economic effects of the first partial government shutdown in 17
years would be limited.

The so-called extraordinary measures used by the Treasury
are accounting maneuvers allowing the government to avoid
breaching the $16.7 trillion debt ceiling. They include allowing
the government to enter into a debt swap with the Federal
Financing Bank and the Civil Service Retirement and Disability
Fund.